WYNDHAM WORLDWIDE CORPORATION

eal estate inventory costs incurred to total estimated costs. These estimated costs are based upon historical
experience and the related contractual terms. The remaining revenues and related costs of sales, including
commissions and direct expenses, are deferred and recognized as the remaining costs are incurred.
We also offer consumer financing as an option to customers purchasing VOIs, which are typically collateralized
by the underlying VOI. The contractual terms of Company-provided financing agreements require that the
contractual level of annual principal payments be sufficient to amortize the loan over a customary period for the
VOI being financed, which is generally ten years, and payments under the financing contracts begin within 45 days
of the sale and receipt of the minimum down payment of 10%. An estimate of uncollectible amounts is recorded at
the time of the sale with a charge to the provision for loan losses, which is classified as a reduction of vacation
ownership interest sales on the Consolidated Statements of Operations. The interest income earned from the
financing arrangements is earned on the principal balance outstanding over the life of the arrangement and is
recorded within consumer financing on the Consolidated Statements of Operations.
We also provide day-to-day-management services, including oversight of housekeeping services, maintenance
and certain accounting and administrative services for property owners’ associations and clubs. In some cases, our
employees serve as officers and/or directors of these associations and clubs in accordance with their by-laws and
associated regulations. We receive fees for such property management services which are generally based upon total
costs to operate such resorts. Fees for property management services typically approximate 10% of budgeted
operating expenses. Property management fee revenues are recognized when earned in accordance with the terms of
the contract and is recorded as a component of service fees and membership on the Consolidated Statements of
Operations. We also incur certain reimbursable costs, which principally relate to the payroll costs for management of
the associations, club and resort properties where we are the employer. These costs are reflected as a component of
operating expenses on the Consolidated Statements of Operations. Property management revenues were $405 million,
$376 million, and $346 million during 2010, 2009 and 2008, respectively. Property management revenue is
comprised of management fee revenue and reimbursable revenue. Management fee revenues were $183 million,
$170 million and $159 million during 2010, 2009, and 2008, respectively. Reimbursable revenues were $222 million,
$206 million, and $187 million respectively during 2010, 2009, and 2008. Reimbursable revenues are based upon
cost with no added margin and thus, have little or no impact on our operating income. During 2010, 2009 and 2008,
one of the associations that we manage paid Wyndham Exchange & Rentals $19 million, $19 million and
$17 million, respectively, for exchange services.
During 2010, 2009 and 2008, gross sales of VOIs were increased by $0 and $187 million and reduced by
$75 million, respectively, representing the net change in revenues that was deferred under the POC method of
accounting. Under the POC method of accounting, a portion of the total revenues from a vacation ownership
contract sale is not recognized if the construction of the vacation resort has not yet been fully completed. Such
deferred revenues were recognized in subsequent periods in proportion to the costs incurred as compared to the total
expected costs for completion of construction of the vacation resort. As of December 31, 2009, all revenues that
were previously deferred under the POC method of accounting had been recognized.
Within our Vacation Ownership segment, we measure operating performance using the following key metrics:
(i) gross VOI sales (including tele-sales upgrades, which are a component of upgrade sales) before deferred sales
and loan loss provisions; (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs;
and (iii) volume per guest, or VPG, which represents revenue per guest and is calculated by dividing the gross VOI
sales, excluding tele-sales upgrades, which are a component of upgrade sales, by the number of tours.
Other Items
We record lodging-related marketing and reservation revenues, Wyndham Rewards revenues, as well as hotel/
property management services revenues for both our Lodging and Vacation Ownership segments, in accordance with
guidance for reporting revenues gross as a principal versus net as an agent, which requires that these revenues be
recorded on a gross basis.
Discussed below are our consolidated results of operations and the results of operations for each of our
reportable segments. The reportable segments presented below represent our operating segments for which separate
financial information is available and which is utilized on a regular basis by our chief operating decision maker to
assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of
services provided by our operating segments. Management evaluates the operating results of each of our reportable
segments based upon revenues and “EBITDA,” which is defined as net income/(loss) before depreciation and
amortization, interest expense (excluding consumer financing interest), interest income (excluding consumer
financing interest) and income taxes, each of which is presented on the Consolidated Statements of Operations. We
believe that EBITDA is a useful measure of performance for our industry segments which, when considered with
GAAP measures, gives a more complete understanding of our operating performance. Our presentation of EBITDA
may not be comparable to similarly-titled measures used by other companies.
39